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tv   Nightly Business Report  PBS  December 29, 2011 6:30pm-7:00pm PST

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captioning sponsored by wpbt >> actually, we think it's probably going to be a similar year to 2011 in the sense that growth is still likely to be quite disappointing. >> susie: from hiring to housing, the outlook for the u.s. economy is muddled. still, u.s. stocks rose sharply today. it's "nightly business report" for thursday, december 29. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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>> susie: good evening, everyone. my colleague, tom hudson, is off tonight. strong gains for u.s. stocks on the second-to-last trading day of the year. investors bought up stocks on fresh economic reports showing an improvement in the housing and job markets. an unexpected jump in pending home sales encouraged investors. the national association of realtors index of pending sales was up 7.3%. that index tracks signed contracts, not completed transactions. but still, that's a 19-month high. in the job market, new claims for jobless benefits rose slightly in the past week, but it was the fourth week in a row that the numbers remained below 400,000, a sign that the labor market is improving. now, all that played very well
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on wall street. the dow rose 135 points, the nasdaq added 23, and the s&p 500 was up 13 points. also moving in a big way today, but in the opposite direction: gold prices, down $23 to $1541. trader anthony neglia explains why gold fell to a five-month low. >> the market right now is fundamentally weak. it's pretty much been broken since we broke through that 200-day moving average of 16, 17 last week. so you know, right now, we're in a true bearish market, and until we get back up and over, for me, anyway, until we get back up and over 1600 dollars, i feel that any of these rallies have to be sold. >> susie: well, investors turned to the safety of gold this past year as the u.s. economic recovery sputtered. but now that there's more positive economic data coming out, does that mean the u.s. economy will be in better shape in 2012? suzanne pratt talked with some wall street pros about what they
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expect in the new year. >> reporter: when it comes to the economy next year, there's good news and bad. the good and perhaps best news is the u.s. is not expected to slide back into a recession. instead, we're likely to keep meandering along, and that's the troubling part. >> the outlook for the u.s. economy heading into 2012 remains one of modest economic activity, below the trend of growth that we saw in prior years. >> actually, we think it's probably going to be a similar year to 11 in the sense that growth is still likely to be quite disappointing. >> reporter: just how disappointing? most economists predict g.d.p. will probably average only about 2% next year, and the problem is that most of the risks are on the downside. we all know that europe wields the biggest monkey wrench for the u.s. recovery, but it's less about trade and more about our financial ties to the region. >> how much are european banks delivering? how serious are the stresses in
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terms of funding for banks? if those don't get contained-- and obviously they're connected to the ability of sovereigns to finance themselves-- that's what could really magnify this and make it a more serious event for the u.s. economy. >> reporter: to be sure, the u.s. has it's own troubles, too. not only is the unemployment rate still stuck above 8%, but many experts say the economy won't fully recover until the housing market climbs out of the basement. by many estimates, there's still plenty of shadow inventory, and that means home prices are likely to fall further. and then there's the fiscal uncertainty that comes in lockstep with a presidential election year. >> if congress can't agree to extend that payroll tax cut, that's going to lead forecasters to downgrade their economic forecasts in q1 and q2 of next year, which is not great for the economy. >> reporter: it is, however, worth noting the economy has picked up speed in the last few weeks of this year. unfortunately, economists do not
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think that momentum will continue well into the new year. suzanne pratt, "nightly business report," new york. >> susie: our guest tonight is bearish on the u.s. economy and the stock market for 2012, and he's predicting a recession in the new year. he's harry dent, president of h.s. dent, an economic research firm. and he's author of the new book, "the great crash ahead." harry, welcome to nightly business report. nice to have you with us. >> nice to be here. >> susie: you heard our report. there are some economic statisticstatistics that have bn improving but i take it you don't bay that? why are you so bearish? >> we look at demographics that really predict consumer trends before they happen and not afterwards and the story has been baby boomers would continue to spend more money-- which they did-- they would start to plateau, but 2012 on we swear declining phase as people's kids are getting out of their nest ask they're saving for retirement. this stimulus is not going to
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keep the economy going, and it's already been struggling thus far. so, yeah, we see, by the second quarter of 2012, the economy is going to slow again and the stimulus back from q.e. 2, which ended in june of 2011 is going to wear off and we'll be back down to zero growth or lower. >> susie: would any kind of federal stimulus help. a lot of investors on wall street are counting on that to happen. will it make a difference? >> it makes a difference immediately for the stock market. but the economy feels it about eight to 10 months later if you look back at the past. if the fed does stimulate, let's say in the second quarter, i think it will be that long because the economy is stronger as we expected here, it will be too late because it won't hit until the end of the year after the election. so i think the fed is kind of trapped here. europe is breaking down, moving into recession. the fed has been on hold on stimulus for now six months, probably another two to three months. i think it could be too late by the time they finally react. >> susie: what's going to turn
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this around? you're talking about baby boomer demographics and a change in buying and spending habits, that's a real long-term trend so what can reverse this negative trajectory that you're talking about? >> you're right, susie, it is a long-term trend. we're talking 2012 to 2020, trends slowing down independent economy no matter what the fed does. one thing the fed can do is help restructure, encourage banks -- they only get assistance if they write down mortgages and business debt. we have $42 trillion in private debt, three times the public debt, which most people aren't aware of. if they write down that debt and get rewarded for that, it would take a trillion, trillion and a half a year lode off consumers and business and free up purchasing power at a time when demographics trends will slow otherwise. >> susie: you're bearish for the outlook for 2012. >> we've been seeing a santa claus rally in late december, maybe early january. we think we're near the end of that and basically stocks are
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getting ready to crash again, like they did in late 2008, early 2009. remember, last time we had a crash, there was a first downturn, early 2008, a bounce, and then it fell apart. i think between january and the summer, high chances of another stock crash. so investors need to get out of the way, out of all the risky assets -- commodities, gold, silver, stocks, here and around the world-- and get in the safest investments you can. >> susie: let me get your definition of a crash over the first six months of the year. how bad are things going to get? what do you mean by that? >> i think this is going to take another couple of years. i think in 2012, we could see it worse, that we retest the lows s in early 9. so that's like 6440 on the dow. that's a big downturn. it may not be that low if the government reacts sooner than later. but i do think if we see growth collapse again, the market's going to lose faith. and, again, europe is already moving into recession. banks are dumping more
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foreclosures on the market because they're in trouble and that's keeping home prices down. again, i think you're talking a 30%, 40%, 50% downside in the next year. this is not something to sit through. >> susie: that's a very provocative forecast. we appreciate you coming on the program. you've given us a lot to think about. thanks so much, harry. happy new year to you. we've been talking with harry dent, economist and author of "the great crash ahead." still ahead: how the holidays are helping rev up sales at the nation's big auto makers, and whether that will continue gaining traction in the new year. the november election promises to define fiscal policy in 2012. but as candidates vie for nominations and public office, analysts expect much of congress' policy work to wait until the last two months of the year. sylvia hall reports on what to expect in the new year. >> reporter: you can hear the noise from iowa as election
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season heats up. and in 2012, and as washington waits for november, analysts expect much of the same, with gridlock continuing. >> i think it's going to be a year for screaming and little action. >> reporter: first up, the extended payroll tax cut, a sticking point between democrats and republicans that gridlocked congress last week. those tax cuts expire in february, along with an unemployment insurance extension and a "doc fix" that prevents deep pay cuts to doctors of medicare patients. alex brill served as an economist on capitol hill and on the council of economic advisors under george w. bush. even if congress extends these benefits again, he only expects a temporary fix, not a solution. >> our other problems, longer- term issues around social security, medicare, those issues will remain in the background while we focus on these nearer- term, temporary issues. >> reporter: that could leave consumers and investors in limbo. >> people are hesitant, they're not sure what the rules of the
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game are going to be in the future, they don't know what the energy policy's going to be, they don't know what the tax policy's going to be. the result is a lot of workers and investors just simply wait. >> reporter: 12 months down the road, even more deadlines loom. the bush tax cuts are set to expire at the end of 2012. that's the same time the pentagon faces steep spending cuts triggered earlier this year when the supercommittee failed. analysts don't see this sharply divided congress moving on any of these issues until after the november election. >> lame ducks are traditionally overpromised and underdelivered. however, this lame duck, not only do you have the sequester trigger, you have expiring bush tax cuts. >> reporter: morningstar's robert johnson says, despite the twists and turns in washington, investors should focus on fundamentals. >> i'd look at overall confidence, productivity, consumer spending as being a bigger indicator of how i'd look at 2012 rather than kind of think some magic fairy from congress is going to save us or cast a magic spell on us in a bad way.
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>> reporter: johnson expects congress to spend most of the year dragging from issue to issue. but he says investors shouldn't focus on the short-term snags and instead should look years down the road. sylvia hall, "nightly business report," washington. >> susie: it was a upbeat day here at the big board, with all of the dow components in the green. and the s&p 500 turned positive for the year. let's take a look now in tonight's "market focus." the buying was broad-based today, with many sectors posting strong gains. leading the way: financials and industrials. homebuilders were also a bright spot; they rallied on that better than expected pending sales data we told you about-- pulte homes and beazer homes jumping over 6% while lennar, toll brothers and d.h. horton posting gains on average of about 4%. and some of these stocks are up at least 40% over the past three months.
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now, other companies benefiting from that building trend: home depot up over 1% and lowes over 2%. and shares of masco, the faucet and insulation company, surged almost 8.5%. masco was the best performer in the s&p 500 today. a lot of buzz about yahoo. new reports today that china's alibaba group has hired a washington lobbying firm to prepare a possible bid to take over yahoo. yahoo shares rose more than 2% to $16 and change. traders are speculating a $20 per share offer from alibaba. the stock got as low as $11 in the summer after c.e.o. carol bartz was fired. well, it was a down day for amazon. goldman sachs warned today that the company's holiday sales will come in lower than expected. amazon countered today, saying its kindle sales could hit record levels in 2012. shares fell only slightly; the stock is down about 3.5% year to date. verizon shares just off their
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52-week high after the company announced it will charge customers a fee for every credit card payment made online or over the phone. verizon shares rose a fraction to $40.05. still, the stock is up 12% this year. starbucks shares continue to percolate higher today. starbucks is popular not only with coffee lovers but also with investors. it rose 1.5% to $46.45. the shares are up nearly 45% for the year. and finally, a.m.r., the parent of american airlines, is having its ticket canceled on the big board. it's being delisted as of january 5. the shares have been trading below a dollar for 30 trading days, a violation of trading rules at the new york stock exchange. and that's tonight's "market focus."
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it still feels like christmas for many car dealers across the country. december vehicle sales are expected to top a million units for the first time since august of 2009, according to a new forecast from j.d. power and associates. as diane eastabrook reports, another good month is helping the auto industry make slow and steady progress towards recovery. >> reporter: it still looks a lot like christmas morning at ettleson cadillac buick g.m.c. near chicago. shoppers who didn't find a new set of wheels under the tree last sunday came out this week to fulfill their wishes. kurt and bella anderson made a
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bee line from their home in northwest indiana to test drive and cut a deal on a cadillac d.t.s. >> we looked online and gave them a call, and we were slick to get here. and we were here in less than an hour, i think. >> reporter: in recent years, december has become one of the best sales months for dealers. j.d. power and associates estimates retail sales for this month will top a million units. that's a 9% increase over the same month a year ago. dealer mike ettleson says buyers are primarily interested in better technology and fuel economy. >> we're selling some cars not with all the bells and whistles. we're selling cars that are transportation for people. i don't think they're stepping up to the absolute top of the line, but they're buying what suits their needs. and the cars today come with so much more standard equipment that they're happy with what they got. >> reporter: u.s. auto sales are slowly pulling themselves out of one of the worst slumps in the industry's history.
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sales plummeted in 2008 and 2009. they've been slowly improving since then. consumers tired of driving old vehicles with high mileage began heading to dealerships this fall after a slow summer. some industry watchers fear those robust sales could taper off after the first of the year. but jeffery schuster, j.d. power's director of global forecasting, doesn't think that will happen. >> i think while there are fears, there is uncertainty, there is risk in the first quarter, i think we're actually going to push through this. i don't know if we'll hit a speed bump or not. depending on how strong december closes, there really isn't anything suggesting that sales are being pulled forward into december. >> reporter: schuster thinks if employment continues to improve and the u.s. economy keeps recovering, auto dealers will wrap up an even better year in 2012. diane eastabrook, "nightly business report," hodgkins, illinois. >> susie: here's what we're watching for tomorrow.
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we'll take a closer look at what college students need to know about the loans they take on. also tomorrow, we wrap up the last trading day of the year with the market's winners and losers. and standard and poor's chief market strategist, sam stovall, joins us with his outlook for stocks in the new year. the u.s. justice department and deutsche telekom have struck a deal to end a bribery investigation. the german telecom giant will pay more than $95 million to settle accusations a subsidiary bribed government officials in macedonia in an effort to gain market share. now, if you're wondering how a foreign firm doing business in macedonia falls under u.s. jurisdiction, it's because deutsche telekom filed u.s. financial statements at the time that listed those bribes as phony business contracts. mortgage rates moved up slightly
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this week after hitting a record low a week ago. freddie mac reports the average rate on a 30-year fixed mortgage was 3.95%. that's up slightly from last week's low of 3.91%. the rate on a 15-year fixed rate mortgage now stands at 3.24%. those super-low rates have failed to boost sales, but the mortgage giant says 5% of households it surveyed said they plan to buy a home in the next year.
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>> susie: everyone points to small businesses as the engine that drives the u.s. economy. but tonight's commentator says those small businesses need help, and it starts with you. he's jerry ross, executive director of the national entrepreneur center. >> as our country grapples with the lasting effects of bailouts of the auto and banking industries, the housing meltdown, persistent unemployment and mounting debt, once again, small business has emerged as the practical solution to rebuilding our economy and creating more jobs. but today, while everyone talks about the importance of small businesses to our recovery, the reality is that most of these truly small businesses have been largely excluded from the initiatives designed to get the economy back on track. from the white house and the state house to your house, we need to stop talking about the importance of small business and start doing something to save them. washington can provide and ensure smaller loans and micro- loans are accessible for a small business. state legislators can provide funding to assist in the education and acceleration of
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a small business. and each of us individually can support a small business by intentionally seeking them out and choosing to do business with them. most small businesses don't have any problems that a few good sales wouldn't cure, and it doesn't take much to make a big difference for a small business. i'm jerry ross. >> susie: a new chapter in the drama about former hewlett- packard c.e.o. mark hurd and his relationship with a female executive. a delaware court ruled today that the contents of a letter with allegations of sexual harassment from a former h.p. contractor can be made public. hurd, now president at oracle, tried to keep that letter private. it is expected to be released over the next two weeks. now, mark hurd is not the only one who was embroiled in controversy. dartmouth's tuck school of business has compiled a list of the worst c.e.o. moves this year. tom hudson recently spoke with professor sydney finkelstein and began by asking him how c.e.o.s did this year. >> 2011 has been a year like
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probably most of the others-- a bunch of people really messed up. some had stellar years. overall, it was a very, very difficult global economic copyright, and i'm sure that that probably made it a little tougher. but as in most situations, most years, some people just perform better than others. >> tom: among those not performing so well was fess 36. the boss there, reed hastings, raised prices, split the business in two and reversed on the decision. how did he come to this remarkable year of poor mistakes? >> in some ways, he was following textbook strategy, because when you have a new, growing business that could potentially obsolete the core business-- i'm saying streamy could potentially obsolete the dvd business-- if you keep them together the core business tend to beat up on the little fledgling, start-up business so you separate them. i get that. i think that makes sense. but raising prices dramatically in the process, not explaining why he was doing what he was doing, and then having to reverse course so quickly makes it sound like, you know, someone wasn't really thinking through
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all of this very well. >> tom: can he recover? can netflix recover from these mistakes? >> they're actually in a position where they don't have a particularly strong competitive advantage, and that's a formula that generally doesn't end up too well. >> tom: research in motion also one you identified as a series of bad mistakes this year. sinking market share, it's playbook tablet computer was a failure and of course the service outages. and, boy, this stock has really come down to multi-year lows. what's ahead for research in motion? >> they're hamstrung by a couple of really important things. number one, these two guys, lazaridis, and balsillie, both smart but co-c.e.o.s hardly ever works. it's hard to lead a company when there are two people at the top. they are tied into their legacy system, and everything they do has to be based on the blackberry legacy model, and that makes it very difficult to innovate. >> tom: let's take a look at an entirely different industry, an old company that has been around, a household name, johnson & johnson.
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this company probably isn't going anywhere but can it recover the brand equity it may have lost this year, let alone the business? >> yes, william welden has led a company that has focused tremendously on cost controls and profitability, and, you know, who is against profitability? but along the way, somehow, product safety, product quality has fallen by the wayside, and that can only happen because of a culture, a culture that starts at the very, very top under weldon, that i think is damaging the brand. >> tom: professor you can say at least those three companies remain in business. john corzine was the c.e.o. of m.f. global. that company had a spectacular collapse around halloween. lots of mistakes to go along with there. in fact, prosecutors are still sorting it out here. but this guy was a public policy leader as a senator former governor and also a business leader, at least up until the last couple of months. >> he created, past tense, a culture that was very heavily focused on risk taking.
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the irony is that despite that, in a post-2008 financial crisis world you have to expect the regulators to kick the tires more than they did a few years ago and they did and corzine should have been smart enough to know that was a very high-probability event that would happen. >> tom: a list of mistakes, some spectacular, some forgettable and regrettable. sydney finkelstein is with us, a business professor at dartmouth. >> susie: that's "nightly business report" for thursday, december 29. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt
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captioned by media access group at wgbh access.wgbh.org >> tom: when we're not on the air, join us online at nbr.com. there, you'll find full episodes of the program. you'll find complete show transcripts and all the market stats on our facebook page at bizrpt. and don't fo to follow us 
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